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If the United States does not address its looming debt crisis, the cost of servicing the national debt will spiral out of control. The annual interest bill, according to a recent Congressional Budget Office report, will increase four-fold to $916 billion by 2020. This year, we will spend 70% less on debt payments than we do on defense. In nine short years, we are expected to spend 8% more.

Washington so far has been unable or unwilling to make the tough choices required to put us on the road toward fiscal sanity. And it is unlikely that a grand bargain will emerge prior to the 2012 election. Nonetheless, our country can still take three short-term steps to bolster confidence in the bond markets and prevent a rise in interest rates that will damage our fragile recovery.

Step No. 1 is to raise the debt limit in a way that generates confidence in the markets. That means including a restraint on spending.

To accomplish this, the debt limit should be increased by an amount sufficient to service the U.S. debt for six months, provided that the proceeds from the increase are used to service debt obligations. Doing this would eliminate the argument that a U.S. default will end Western civilization as we know it. And we should also increase the debt limit by an additional amount sufficient to cover the federal government's anticipated borrowing needs for the next six months. But we must do so only if the administration and Congress agree to a cap on total spending that will be enforced by sequestering spending from specific programs or by cuts across the board—and only if, in addition, agreed-upon amounts and types of projected spending are eliminated. Special care here should be taken not to agree to waivers, exceptions or exemptions that could be used to defeat the purpose of the cap, sequester or across-the-board cuts.

Last month, this is what Baker told the boss at Reagan National airport:

The former Treasury secretary, a pillar of the GOP and financial establishments, asked me rather forcefully to tell "my friends" on the Hill to insist on real, enforceable spending caps. I expressed a bit of surprise at his Tea Party-like militancy. Baker was unabashed: "Here's my slogan: Don't renew the credit card!" I asked whether I could quote him on that. "Damn sure."